738 F.Supp.3d 859
S.D. Tex.2024Background
- Safety Vision LLC contracted with LEI Technology Canada in 2016 for the design and manufacture of a custom video recording device (RR8000) for use in public transit.
- The contract (ODM Agreement) required the RR8000 to meet certain ISO standards (specifically, Class C functional status) and outlined an exclusive repair or replacement remedy for breaches.
- Safety Vision purchased approximately 1,200 units, many of which failed or were returned due to ongoing technical issues, leading to substantial losses.
- Safety Vision sued LEI, alleging breach of contract, breach of implied warranty, breach of express warranty, violations of the DTPA, and fraudulent concealment.
- LEI filed motions for summary judgment and to strike certain expert testimony; the Court granted both in part and denied both in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of Exclusive Remedy | Remedy doesn't cover design defects/fails its purpose | Remedy covers all defects & wasn't shown to have failed | Applies to all defects; but whether it failed = jury Q |
| Conspicuousness of Implied Warranty Waiver | Waiver was not conspicuous or known to Safety Vision | Waiver was valid and Safety Vision had notice | Waiver not conspicuous; implied warranty claim can proceed |
| Consequential Damages Waiver | Waiver is unconscionable with limited warranty | Waiver valid under Texas law, especially commercially | Waiver valid and enforceable; not unconscionable |
| DTPA Claim on Transaction Value | DTPA should apply since contract didn't mandate quantity | Totality of purchases exceeds $500,000 threshold (exception) | DTPA claim barred; total consideration exceeded limit |
| Fraudulent Concealment/Economic Loss Rule | LEI concealed material facts post-contract | Economic loss rule bars tort claim arising from contract breach | Economic loss rule applies; claim dismissed |
| Implied Warranty—Displacement by Specs | LEI designed RR8000, specs not solely from buyer | Buyer-provided specs displaced implied warranties | No evidence buyer gave specs; claim not displaced |
| Express Warranty—Conditions Precedent | Repairs failed or were impossible in some cases | Safety Vision failed to return all units as required | Only units returned for repair can proceed |
| Breach of Contract—Acceptance/Revocation | Acceptance revoked due to non-conformity | Acceptance final, revocation was untimely/ineffective | Disputed; issue for jury to decide |
| Expert Declaration—Undisclosed Opinions | Expert reliance on prior declaration sufficient | New causation opinions not disclosed; asked to strike | Stricken in part as undisclosed; rest allowed |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (material fact definition for summary judgment)
- Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617 (economic loss rule in Texas)
- Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41 (fraudulent inducement and economic loss)
- Cate v. Dover Corp., 790 S.W.2d 559 (actual knowledge exception to conspicuousness requirement)
- Delhomme Indus. v. Houston Beechcraft, Inc., 669 F.2d 1049 (test for failure of essential purpose in repair/replace remedies)